• Proposals Made to Simplify Exchanging
  • May 2, 2003
  • Law Firm: Miller Nash LLP - Portland Office
  • The staff of the Joint Committee on Taxation has made a number of legislative proposals for consideration by Congress to simplify tax-free exchanges. The proposals were included as part of a series of proposals to simplify our very complicated tax rules. It is likely that Congress and the administration will seriously consider enacting these rules in future tax legislation.

    The first recommendation is to allow rollover of gain in a tax-free exchange to be completed without an accommodator and without complying with the 45-day designation rules. The only significant rule would be that the replacement property had to be purchased within 180 days of the sale of the relinquished property. The accommodation industry, realizing that its services may no longer be required, is considering any industry wide response. The response may include commissioning a study showing a significant loss in tax revenue because many more taxpayers will complete exchanges.

    The second recommendation is to clarify the law to make it clear that transferring either relinquished or replacement property to or from a partnership or corporation in certain tax-free transactions will be allowed. In the past, the IRS has argued that such a transfer may mean that the relinquished property or replacement property is not held for investment. Such a clarification of the law would be welcomed by all parties in the exchange industry.